President Obama Releases Deficit Plan: Calls for Strengthening IPAB

On April 13, President Barack Obama released his plan to reduce the deficit by $4 trillion in 12 years or less. The plan comes on the heels of the Republican budget proposal.

The President’s plan focuses heavily on reducing health care costs as a way to reduce future deficits. As part of his plan, the President wants to strengthen the Independent Payment Advisory Board (IPAB) that was created as part of the Patient Protection and Affordable Care Act (PPACA). The President’s plan calls for establishing a target to hold Medicare cost growth per beneficiary to GDP per capita plus 0.5 percent beginning in 2018. ASA strongly opposes IPAB and is advocating for its repeal.

The President is also calling for reforms to Medicaid that would replace the many complicated federal matching formulas with a single matching rate for all program spending that rewards states for efficiency. The President believes the new Partnership for Patients, a public-private partnership, will reduce costs by $50 billion in 10 years. The plan would also attempt to cut unnecessary prescription drug spending and increase accountability in Medicaid and Medicare.

This new plan seems at odds with the administration’s previous efforts to permanently fix the SGR. To achieve the targets proposed, the IPAB cuts would be in addition to SGR cuts.

In addition to the health care focus, President Obama’s proposal increases taxes by not extending the Bush tax cuts. Overall, the President’s plan would increase taxes by $1 for every $3 in spending cuts and interest savings. The plan also cuts non-security discretionary spending by $770 billion and security spending by $400 billion by 2023. Finally, the plan would establish a “Debt Failsafe” that would trigger across the board spending reductions if the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade.

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